Latest Round of Wall Street Regulatory Idiocy: Zipper/Dakota v. FINRA Arrives at Point of Insanity (BrokeAndBroker.com Blog)
https://www.brokeandbroker.com/7145/zipper-dakota-finra-sec/
The hammer continues to hammer. The tongs continue to squeeze. The ping-pong game goes back and forth. In the latest round of Wall Street regulatory idiocy, we arrive at the point of insanity in the Matter of BRUCE ZIPPER and DAKOTA SECURITIES INTERNATIONAL, INC. For Review of Disciplinary Action Taken by FINRA (SEC Second Order Requesting Additional Written Submission)

2Cir Says Notes Are Not Securities
Marc S. Kirschner v. JP Morgan Chase Bank, N.A. et al. (Opinion, United States Court of Appeals for the Second Circuit,  No. 21-2726)
https://brokeandbroker.com/PDF/Kirschner2Cir230824.pdf
As set out in the Syllabus:

Plaintiff-Appellant Marc S. Kirschner brought a series of claims in New York state court arising out of a syndicated loan transaction (the “Transaction”) ¹ facilitated by the defendants-appellees, a group of financial institutions. Plaintiff’s appeal presents two issues. The first issue presented is whether the United States District Court for the Southern District of New York (Paul G. Gardephe, Judge) had subject matter jurisdiction over this action pursuant to the Edge Act, 12 U.S.C. § 632. The second issue presented is whether the District Court erroneously dismissed plaintiff’s state-law securities claims on the ground that he failed to plausibly suggest that notes issued as part of the syndicated loan transaction are securities under Reves v. Ernst & Young, 494 U.S. 56 (1990).

We hold that the District Court had jurisdiction under the Edge Act because defendant-appellee JP Morgan Chase Bank, N.A. engaged in international or foreign banking as part of the transaction giving rise to this suit. We also hold that the District Court did not erroneously dismiss plaintiff’s state-law securities claims because plaintiff failed to plausibly suggest that the notes are securities under Reves.

We accordingly AFFIRM the District Court’s September 24, 2018 order determining that it had jurisdiction pursuant to the Edge Act and AFFIRM its May 22, 2020 order dismissing plaintiff’s state-law securities claims.

= = =

1 “A syndicated loan is a loan extended by a group of financial institutions (a loan syndicate) to a single borrower.” Syndicated Loan Portfolios of Financial Institutions, Bd. of Governors of the Fed. Rsrv. Sys., https://www.federalreserve.gov/releases/efa/efa-project-syndicated-loanportfolios-of-financial-institutions.htm (last visited July 30, 2023); see also Fed. Deposit Ins. Corp., Risk Management Manual of Examination Policies, Loans § 3.2- 73 (May 2023) (“FDIC Manual”) (“A syndicated loan involves two or more banks contracting with a borrower, typically a large or middle market corporation, to provide funds at specified terms under the same credit facility.”).

Robinhood Financial LLC vs. Secretary of The Commonwealth et al. (Massachusetts Supreme Judicial Court / SJC-13381)
https://brokeandbroker.com/PDF/robinhoodMass230825.pdf
As set forth in the Court's preamble [Ed: footnotes omitted]:

WENDLANDT, J. Unlike the fabled "Prince of Thieves," who took from the rich to give to the poor, the plaintiff Robinhood Financial LLC (Robinhood), is accused by the Secretary of the Commonwealth (Secretary) of taking advantage of unsophisticated investors to fill its own coffers by dispensing ill-suited investment advice to these customers and by encouraging them to engage in risky trading practices using its online trading platform. This conduct, the Secretary alleges, violated the prohibition of the Massachusetts Uniform Securities Act, G. L. c. 110A (MUSA), against "unethical or dishonest conduct or practices in the securities, commodities[,] or insurance business," G. L. c. 110A, § 204 (a) (2) (G) -- a phrase that the Secretary has defined to require broker-dealers that provide investment advice to retail customers to comply with a statutorily defined fiduciary duty, see 950 Code Mass. Regs. § 12.207(1)(a) (2020) (fiduciary duty rule or rule). Unlike prior standards of care, which differentiated between broker-dealers and investment advisers in view of their traditionally distinct investment services and offerings, the rule brings the fiduciary obligations of broker-dealers in line with those of investment advisers, making uniform the duties owed by those engaged in the business of providing investment advice regardless of label. The rule, according to the Secretary, was needed to protect investors confused by the increasingly blurred line between broker-dealers providing investment advice and investment advisers.

This case concerns the question whether, by promulgating the fiduciary duty rule, the Secretary overstepped the bounds of the authority granted to him under MUSA. We conclude that he did not. We further conclude that the fiduciary duty rule does not override the common-law protections available to investors, that MUSA is not an impermissible delegation of legislative power, and that the rule is not preempted by the Securities and Exchange Commission's (SEC) determination to impose a national "best interest" standard of care on broker-dealers, 17 C.F.R. § 240.15l-1 (2019) (Regulation Best Interest). We therefore reverse the judgment entered by a Superior Court judge on the pleadings in a civil action challenging the validity of the fiduciary duty rule, and we remand the matter for further proceedings.

Dramatic Federal Complaint Calls FINRA "Congressionally-authorized bounty hunter"
Eugene H. Kim, Plaintiff, v. Financial Industry Regulatory Authority, Inc., Defendant (Complaint, United States District Court for the District of Columbia, 23-CV-2420)
https://brokeandbroker.com/PDF/KimDDCCompl230818.pdf
As alleged in the preamble of the Complaint drafted by Martin H. Kaplan, Esq. and Kari Parks, Esq. of Gusrae Kaplan Nusbaum PLLC: 

Through undersigned counsel, Plaintiff Eugene H. Kim files this “Complaint” against Defendant Financial Industry Regulatory Authority, Inc. (“FINRA”).

1. This is a constitutional challenge to FINRA’s enforcement structure and the pending “Enforcement Action” against Mr. Kim
2. While FINRA claims to be a private corporation with no constitutional responsibilities, it acts as a Congressionally-authorized bounty hunter with statutory authority to enforce federal securities laws against hundreds of thousands of Americans.
3. Incorporated as a not-for-profit, FINRA is the nation’s only remaining securities “self-regulatory organization,” empowered by Congress to regulate, discipline,and enforce federal securities law against the American securities industry and its professionals.
4. In practice, FINRA is nothing more than the federal government’s private, outsourced mall cop that metes and doles arbitrary “discipline” unto securities professionals while escaping actual supervision and control by the Executive (let alone the Legislative or Judicial) branch.
5. FINRA is violating the Constitution’s separation-of-powers provisions by empowering its salaried personnel to unlawfully wield Executive power that the Constitution has granted solely to the President and officers under his supervision.
6. Moreover, FINRA’s disciplinary process and the Enforcement Action’s evidentiary rules (or lack thereof) violate the Fifth Amendment.
7. FINRA’s disciplinary process and the Enforcement Action further violate the Constitution by stripping respondents of their Seventh Amendment right to an impartial jury of their peers.
8. Moreover, FINRA invokes its supposed “private not-for-profit” status to strip witnesses of their Fifth Amendment rights, presenting a Hobson’s choice of either testifying against themselves or accepting the automatic industry death sentence of a lifetime bar from the securities industry.
9. At the same time, FINRA continually (and successfully) argues that sovereign immunity protects it from money damages suits alleging that FINRA broke federal law.
10. Finally, FINRA’s monopolization of all securities SRO power violates the First Amendment and the Sherman Act, 15 U.S.C. § 2. 
11. In this case, FINRA has filed an Enforcement Action alleging that Mr. Kim made material misstatements and omissions in connection with the sale of securities.
12. In other words, FINRA is trying to enforce federal securities laws against Mr. Kim—despite the fact that FINRA’s own Complaint recognizes that all of the allegedly-defrauded customers actually profited handsomely from the investments that Mr. Kim sourced for them.
13. Instead of referring Mr. Kim’s case to the SEC or federal prosecutors, FINRA is acting as the investigator, prosecutor, judge, and jury in the Enforcement Action.
14. FINRA also is the executioner: it seeks to bar Mr. Kim from working in the American securities industry. 
15. In demanding to have it both ways, FINRA—with the blind-eye approval of the Executive and Legislative branches—is violating the “long term, structural protections against abuse of power [that are] critical to preserving liberty.” Cf. Free Enterprise Fund v. PCAOB, 561 U.S. 477, 501 (2010) (quoting Bowsher v. Synar, 478 U.S. 714, 730 (1986)).
16. But convenience never trumps the Constitution. 
17. Therefore, Mr. Kim seeks declaratory judgment that FINRA is violating the Constitution and the Sherman Act, and preliminary and permanent injunctions prohibiting the unlawful Enforcement Action and prohibiting FINRA from pursuing further action against him unless and until FINRA complies with the law.
    

"Securities Industry Commentator/BrokeAndBroker.com Blog" publisher Bill Singer, Esq. sends email to FINRA Chief Executive Officer Robert Cook and FINRA Chief Legal Officer Robert Colby with Copy to Jennifer Piorko Mitchell, Office of the Corporate Secretary, FINRA
Email from Bill Singer, Esq. to Senior FINRA Executives Cites Reports of Alleged Efforts to Obtain "Votes in Abstention" in This Year's Uncontested Small Firm Governor Election

Gentlemen:

I have received several communications from purported FINRA Small Firm Executive Representatives and industry compliance/regulatory consultants alleging that they are receiving phone calls from a company that asserts it has been retained by FINRA for the purpose of contacting Executive Representatives eligible to vote for the Small Firm Governor. Some of the folks contacted had decided to "boycott" the 2023 Small Firm Governor election and did not return their proxy. When the caller was informed of the decision to boycott via the non-submission of a proxy, the caller purportedly pressed the representative to cast a vote in "Abstention." When some of the representatives indicated that they preferred to participate in the boycott and not cast a vote, the caller allegedly pressed them and said that they could opt to "not vote" by also casting a vote in "abstention." A number of representatives advised me that no mention whatsoever was by the caller that a vote in abstention could/would be counted towards a "quorum." Further, many of the representatives/consultants noted that they found FINRA's agent's conduct odd given that one and only one candidate is running for the Small Firm seat.

I would respectfully ask that you investigate this issue and provide me with some clarification. Obviously, I believe that I am the initial, prime mover beyond the 2023 FINRA elections boycott and I am troubled by the allegations above that were presented to me last week. Further, I would ask that FINRA conduct a statistical analysis to determine whether the number of votes in "Abstention" cast in this year's Small Firm election have meaningfully increased from prior years; and, as such, would confirm the reports of pressure from the proxy firm to elicit a vote in abstention rather than accept a representative's decision to boycott the election by not casting any vote. If there has been pressure to vote in abstention, I would likely consider that inappropriate intrusion into the election process. Further, although I would not take issue with FINRA's efforts to "harvest" votes in a contested election, the purpose of purportedly pressuring representatives to cast a vote in abstention during an uncontested, one-candidate-only election seems designed to validate the election of a candidate in an election that fails to generate sufficient votes to constitute a quorum.

Sincerely,

Bill Singer

See: "Bill Singer Renews Call To Boycott FINRA 2023 Elections" (BrokeAndBroker.com Blog /  August 11, 2023"
https://www.brokeandbroker.com/index.php?a=blog&id=7141

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Nathanial Chastain Traded on Inside Information About NFTs That Were Scheduled to Be Featured on the Homepage of the Largest NFT Marketplace (DOJ Release)
https://www.justice.gov/usao-sdny/pr/former-employee-nft-marketplace-sentenced-prison-first-ever-digital-asset-insider
In the United States District Court for the Southern District of New York, after trial, Nathaniel Chastain, 31 (former product manager of Ozone Networks, Inc. d/b/a OpenSea) was convicted of wire fraud and money laundering; and he was sentenced to three months of home confinement plus three years of supervised release, and ordered to pay a $50,000 fine, and forfeit the Ethereum he made trading the featured non-fungible tokens ("NFTs"). As alleged in part in the DOJ Release:

As part of his employment, CHASTAIN was responsible for selecting NFTs to be featured on OpenSea’s homepage.  OpenSea kept confidential the identity of featured NFTs until they appeared on its homepage.  After an NFT was featured on OpenSea’s homepage, the price buyers were willing to pay for that NFT, and for other NFTs made by the same NFT creator, typically increased substantially.  In violation of the duties of trust and confidence he owed to his employer, OpenSea, CHASTAIN exploited his advanced knowledge of what NFTs would be featured on OpenSea’s homepage for his personal financial gain.

From approximately June to September 2021, CHASTAIN used OpenSea’s confidential business information about what NFTs were going to be featured on its homepage to secretly purchase dozens of NFTs shortly before they were featured.  After those NFTs were featured on OpenSea, CHASTAIN sold them at profits of two- to five-times his initial purchase price.  To conceal the fraud, CHASTAIN conducted these purchases and sales using anonymous digital currency wallets and anonymous accounts on OpenSea. 

Permanent Injunction and $650,000 Civil Penalty Imposed on Experian Consumer Services for Allegedly Sending Commercial Emails Without Providing Consumers the Ability to Opt Out of Future Emails, in Violation the CAN-SPAM Act (DOJ Release)
https://www.justice.gov/opa/pr/permanent-injunction-and-650000-civil-penalty-imposed-experian-consumer-services-allegedly
ConsumerInfo.com, Inc. d/b/a Experian Consumer Services agreed to a permanent injunction and a $650,000 civil penalty as part of a settlement to resolve alleged violations of the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM Act), the Controlling the Assault of Non-Solicited Pornography and Marketing Rule (CAN-SPAM Rule), and the Federal Trade Commission Act. As alleged in part in the DOJ Release:

The case, filed in the U.S. District Court for the Central District of California, involves emails Experian sent to consumers who had created free Experian accounts to control third-party access to their credit reports. Account holders may “freeze” their credit reports to make them inaccessible to identity thieves and legitimate potential creditors such as banks. They can also “unfreeze” their credit reports when they require a credit check, for example, to finance a expensive purchase. The complaint asserts that Experian sent its account holders millions of commercial emails promoting additional Experian services. These emails asked the consumer to confirm whether a car that Experian had associated with the user’s account was theirs, offered a service aimed at boosting the user’s credit score, and advertised a free scan of the dark web. The emails did not give the recipients notice that they could opt-out of future such emails or provide any opt-out mechanism, violating the CAN-SPAM Act and the CAN-SPAM Rule. The complaint alleges that these emails implied that they contained important information about the recipient’s account, even though they were commercial in nature. The government received many consumer complaints that these emails contained no opt-out mechanism.

[E]mployees of a 3M wholly owned subsidiary based in China arranged for Chinese government officials employed by state-owned health care facilities to attend overseas conferences, educational events, and health care facility visits, ostensibly as part of the Chinese subsidiary’s marketing and outreach efforts. However, the arrangements to attend the events were often a pretext to provide the Chinese government officials with overseas travel, including tourism activities, to induce them to purchase 3M products.

Specifically, the order finds that, from at least 2014 to 2017, 3M’s Chinese subsidiary provided Chinese government officials overseas travel that included guided tours, shopping visits, day trips to nearby sights, and other leisure activities. According to the order, in a number of instances, the tourism activities were scheduled at the same time as the events the officials were supposedly attending, and at times the Chinese officials missed whole days of the events or simply never attended at all. Also, the events were in English and certain trips included Chinese government officials who neither understood English nor had adequate translation services. The order finds that 3M’s Chinese subsidiary paid nearly $1 million to fund at least 24 trips for Chinese government officials that included tourism activities.

According to the order, to obtain approval for the trips, the employees of 3M’s China-based subsidiary created a travel itinerary for the Chinese government officials to attend legitimate events, and the employees provided the itineraries to compliance personnel at the subsidiary for approval. However, the employees, in collusion with Chinese travel agencies, also created alternate itineraries consisting of tourism activities at or near the location of the overseas educational events, which the employees provided to the Chinese officials who went on the trips. The employees asked the trip participants to keep the alternate agenda hidden and falsified internal compliance documents that affirmatively denied or omitted mention of the tourism activities that they had planned as part of the overseas trip.

In addition, the order finds that, between February 2016 and September 2018, employees of 3M’s China-based subsidiary arranged for 3M to transfer $254,000 directly to a Chinese travel agency to help pay for some of the improper tourism activities.

Wells Fargo Settles with SEC for Charging Excessive Advisory Fees (SEC Release)
https://www.sec.gov/news/press-release/2023-159
Without admitting or denying the charges in an SEC Order
https://www.sec.gov//litigation/admin/2023/34-98221.pdf finding violations of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7, Wells Fargo Clearing Services LLC and Wells Fargo Advisors Financial Network LLC consented to a cease-and-desist order, Censure, and $35 million penalty, As alleged in part in the SEC Release:

[C]ertain financial advisers from Wells Fargo and its predecessor firms agreed to reduce the firms’ standard, pre-set advisory fees for certain clients and made handwritten or typed changes on the clients’ investment advisory agreements that reflected the reduced fees at the time their accounts were opened. However, in certain instances, the account processing employees at Wells Fargo and its predecessor firms failed to enter the agreed-upon reduced advisory fee rates into the firms’ billing systems when setting up the clients’ accounts. Additionally, Wells Fargo failed to adopt and implement written compliance policies and procedures reasonably designed to determine whether the billing systems it adopted contained accurate data and to prevent overbilling of the clients that the firm acquired through its predecessor firms and certain of its own new clients. As a result, Wells Fargo and its predecessor firms overcharged certain clients who opened accounts prior to 2014 for advisory fees through the end of December 2022.

SEC Charges Former Attorney at U.S.-Based Global Law Firm with Insider Trading / Visiting attorney at the Washington, D.C. office of  law firm used access to confidential client info to make illegal profits (SEC Release)
https://www.sec.gov/news/press-release/2023-158
In the United States District Court for the District of Columbia, the SEC filed a Complaint charging Romero Cabral da Costa Neto
https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-158.pdf with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. As alleged in part in the SEC Release:

[I]n 2023, during Costa’s one-year term of employment as a visiting attorney at the law firm, he accessed confidential information about the law firm’s work on the biopharmaceutical company Swedish Orphan Biovitrum AB’s acquisition of CTI BioPharma Corp. (CTIC). The complaint alleges that, on May 9, 2023, the day before the deal was publicly announced, Costa purchased more than 10,000 shares of CTIC. He then allegedly sold those shares in violation of securities laws and the firm’s policies, including its policy against insider trading, on the day of the announcement, realizing a profit of more than $42,000. In addition to CTIC, Costa traded in the securities of several other issuers represented by the law firm, close in time to material announcements by those companies.  

[F]rom the Blazar Token’s launch in November 2021 to its eventual collapse, DeSalvo raised at least $620,000 from approximately 220 investors. As the complaint alleges, DeSalvo claimed that the Blazar Token would replace existing state pension systems and falsely told investors that Blazar Token was registered with the SEC; that he had arranged for Blazar Token to be purchased by automatic payroll deduction; and that investors were guaranteed to receive extraordinary returns. Ultimately, DeSalvo misappropriated and misused investor funds. According to the complaint, DeSalvo targeted law enforcement and first responders with his fraudulent schemes.

Additionally, the SEC’s complaint alleges that, in an earlier fraud scheme, beginning in late January 2021, DeSalvo solicited investors, primarily through social media, to participate in an investment venture where he was to invest their funds in stocks, options, and crypto asset securities. The complaint alleges that, within weeks of depositing the $95,000 he raised from 17 investors into his brokerage account, DeSalvo lost about $17,000 of those funds in speculative investments, misappropriated the remaining $78,000, and told investors that the group’s securities had lost all value due to poor market conditions.

To enhance transparency, the final rules will require private fund advisers registered with the Commission to provide investors with quarterly statements detailing certain information regarding fund fees, expenses, and performance. In addition, the final rules will require a private fund adviser registered with the Commission to obtain and distribute to investors an annual financial statement audit of each private fund it advises and, in connection with an adviser-led secondary transaction, a fairness opinion or valuation opinion.

To better protect investors, the final rules will prohibit all private fund advisers from providing investors with preferential treatment regarding redemptions and information if such treatment would have a material, negative effect on other investors. In all other cases of preferential treatment, the Commission adopted a disclosure-based exception to the proposed prohibition, including a requirement to provide certain specified disclosure regarding preferential terms to all current and prospective investors. 

In addition, the final rules will restrict certain other private fund adviser activity that is contrary to the public interest and the protection of investors. Advisers generally will not be prohibited from engaging in certain restricted activities, so long as they provide appropriate specified disclosure and, in some cases, obtain investor consent. The final rules, however, will not permit an adviser to charge or allocate to the private fund certain investigation costs where there is a sanction for a violation of the Investment Advisers Act of 1940 or its rules.

To avoid requiring advisers and investors to renegotiate governing agreements for existing funds, the Commission adopted legacy status provisions applicable to certain of the restricted activities and preferential treatment provisions. Such legacy status will apply to those governing agreements entered into in writing prior to the compliance date and with respect to funds that have commenced operations as of the compliance date. 

SEC Adopts Amendments to Exemption From National Securities Association Membership / Amendments will enhance FINRA oversight of firms that trade securities proprietarily across markets (SEC Release)
https://www.sec.gov/news/press-release/2023-154
The SEC adopted a Rule Amendment  https://www.sec.gov/rules/2015/03/exemption-certain-exchange-members narrowing the exemptions from Section 15(b)(8)’s national securities association membership requirement. The narrower exemptions apply when a broker or dealer that does not carry customer accounts and is a member of at least one exchange effects off-member-exchange securities transactions that: (1) result solely from orders that are routed by a national securities exchange of which it is a member to comply with order protection regulatory requirements, or (2) are solely for the purpose of executing the stock leg of a stock-option order. 

SEC Chair and Commissioners' Statements
Some might say that we got a lot of SEC Commissioners and the Chair with a tad too much time on their hands and perhaps too many things to get off their chest. Others might say that regulation works best (better) when we actually know what the regulators are thinking. I got my opinion but I'm keeping it to myself. Knock yourself out reading all of the pearls of wisdom below: 

SEC Denies Whistleblower Award to Claimant 
Order Determining Whistleblower Award Claim ('34 Act Release No. 34-98220; Whistleblower Award Proc. File No. 2023-80)
https://www.sec.gov/files/rules/other/2023/34-98220.pdf
The Claims Review Staff ("CRS") issued a Preliminary Determination recommending the denial of a Whistleblower Award to Claimant. The Commission ordered that CRS's recommendations be approved. The Order asserts in part that:

[W]hile Enforcement staff responsible for the Covered Action received two of Claimant 1’s tips, the information was not useful as it was either unrelated to the conduct that ultimately formed the charges in the Covered Action or based on publicly available information, of which they were already aware. Finally, Enforcement staff responsible for the Covered Action had no communications with Claimant 1, and to the extent he/she had communications with other Commission staff, they were not part of the Enforcement team responsible for the Covered Action.  

Nomura Securities International Agrees to Pay $35 Million Penalty Stemming from Its Participation in Securities Fraud Scheme (SEC Release)
https://www.justice.gov/usao-ct/pr/nomura-securities-international-agrees-pay-35-million-penalty-stemming-its-participation
The United States Attorney for the District of Connecticut and Nomura Securities International ("NSI" is a U.S.-based broker-dealer subsidiary of Nomura Holdings) entered into a Non-Prosecution Agreement ("NPA") https://www.justice.gov/d9/2023-08/nomura_npa.pdf relating to the firm's fraudulent trading of Residential Mortgage Backed Securities (“RMBS”). Under the terms of the NPA, NSI agreed to pay a penalty of $35 million and make restitution to victims of $807,717.68; previously the firm paid $20,125,614.59 in remediation to victims as part of its SEC settlement. As alleged in part in the DOJ Release:

 [NSI] – principally from its trading floor in New York City – perpetrated a scheme from 2009 to 2013 to defraud its customers in RMBS trades.  The purpose and effect of NSI’s fraud was to increase its profits on RMBS trades at the expense of victim customers, including victim customers based in Connecticut.  NSI conducted this scheme by, through, and with its employees, who acted with the knowledge, encouragement, and participation of NSI supervisors, including those tasked with compliance responsibilities.

NSI conducted its scheme by misrepresenting material facts to deceive and cheat its customers in trades.  For instance, in certain transactions, NSI traders lied to the buyer about the seller’s asking price (or vice versa), keeping the difference between the price paid by the buyer and the price paid to the seller for NSI.  In other transactions, NSI traders misrepresented to the buyer that bonds held in NSI’s inventory were being offered for sale by a fictitious third-party seller, which allowed NSI to charge the buyer an extra, unearned commission.  NSI supervisors instructed its RMBS traders in, and caused them to use, these fraudulent trading practices.  NSI, with full knowledge and participation of its supervisors, lied to victims who detected or suspected that they had been the victims of fraud.  NSI concealed its fraudulent conduct from its customers, and from its own employees who were not participants in the scheme, in order to prevent or delay discovery.

. . .

This resolution takes into account NSI’s extensive cooperation, acceptance of responsibility for its and its employees’ criminal conduct, remediation efforts, including its discipline and/or termination of employees and its commitment to make complete restitution to all impacted customers, enhanced compliance program, and agreement to continue to cooperate with law enforcement.  The U.S. Attorney’s Office did not require NSI to retain an independent consultant to assess and improve NSI’s compliance and ethics program because NSI has already taken steps to reasonably prevent and detect further fraud, and because of certain structural changes in the secondary market for RMBS that would make repetition of the conduct less likely.

SEC Charges Five Companies for Failure to Disclose Complete Information On Form NT (SEC Release)
https://www.sec.gov/enforce/34-98192-s
The SEC charged five companies for announcing restatements or corrections to financial reporting within 3-21 days of their Form NT filings despite failing to provide details disclosing that anticipated restatements or corrections were among the principal reasons for their late filings; and, further for failing to disclose on Form NT, as required, that management anticipated significant changes in results of operations.Without admitting or denying the SEC findings, the companies (as noted below) agreed to cease-and-desist-orders that made the following findings and require payment of the following penalties:

Omnia Wellness, Inc. (OMWS) - Filed one deficient Form NT and filed one untimely Form 8-K. The New York-based company agreed to pay a penalty of $60,000.

ReShape Lifesciences Inc. (RSLS) - Filed one deficient Form NT. The California-based company agreed to pay a penalty of $35,000.

Vivic. Corp. (VIVC) - Filed one deficient Form NT and one untimely Form 8-K The Nevada-based company agreed to pay a penalty of $60,000.

Black Spade Acquisition Co (BSAQ) - Filed one deficient Form NT. The Hong Kong-based company agreed to pay a penalty of $35,000.

Alpine 4 Holdings, Inc. (ALPP) - Filed one deficient Form NT and one untimely Form 10-Q. The Arizona-based company agreed to pay a penalty of $60,000.

SEC Charges Fundrise Advisors, LLC for Paying Content Creators to Solicit Clients in Violation of the Cash Solicitation Rule (SEC Release)
https://www.sec.gov/enforce/ia-6381-s
Fundrise consented to the entry of the SEC’s order finding that the firm willfully violated the compliance and former cash solicitation provisions of Section 206(4) of the Investment Advisers Act of 1940 and Rules 206(4)-3 and 206(4)-7 thereunder. Without admitting or denying the findings in an SEC Order
https://www.sec.gov/files/litigation/admin/2023/ia-6381.pdf, Fundrise Advisors, LLC  agreed to a cease-and-desist order, a censure, and a $250,000 civil penalty. As alleged in part in the SEC Release:

[F]om February 2016 through December 2021, Fundrise made cash payments to over 200 social media influencers and publishers of online newsletters to solicit clients for Fundrise. The order finds that Fundrise did not require the solicitors to provide clients with certain disclosures required by the rules governing cash solicitation payments in effect at that time: specifically, Fundrise’s brochure and a separate written disclosure document describing the solicitor’s relationship with Fundrise and the terms of the compensation agreement.

SEC Charges FinTech Investment Adviser Titan for Misrepresenting Hypothetical Performance of Investments and other Violations / These charges mark the first violation of the SEC’s amended marketing rule (SEC Release)
https://www.sec.gov/news/press-release/2023-153
Without admitting or denying the findings in an SEC Order,
https://www.sec.gov/litigation/admin/2023/ia-6380.pdf, Titan Global Capital Management USA LLC agreed to a cease-and-desist order, a censure, and to pay $192,454 in disgorgement, prejudgment interest and an $850,000 civil penalty. As alleged in part in the SEC Release:

[F]rom August 2021 to October 2022, Titan, which offers multiple complex strategies to retail investors through its mobile trading app, made misleading statements on its website regarding hypothetical performance, including by advertising “annualized” performance results as high as 2,700 percent for its Titan Crypto strategy. The order alleges that Titan’s advertisements were misleading because they failed to include material information, for example, that the hypothetical performance projections assumed that the strategy’s performance in its first three weeks would continue for an entire year. The order also finds that Titan violated the marketing rule by advertising hypothetical performance metrics without having adopted and implemented required policies and procedures or taking other steps required by the Commission’s marketing rule, which was amended in December 2020.

The SEC’s order further finds that Titan (1) made conflicting disclosures to clients about how Titan custodied crypto assets; (2) included in its client advisory agreements liability disclaimer language that created the false impression that clients had waived non-waivable causes of action against Titan; and (3), contrary to representations, failed to adopt policies and procedures concerning employee personal trading in crypto assets. The order also states that Titan self-reported to the SEC staff that it failed to ensure that client signatures were obtained for certain types of transactions in client accounts and agreed to settle related charges.

SEC Obtains Final Judgment Against Illinois Resident for Insider Trading (SEC Release)
https://www.sec.gov/litigation/litreleases/lr-25813
Without admitting or denying the allegations in an SEC Complaint filed in the United States District Court for the Northern District of Illinois, Daniel V. T. Catenacci consented to the entry of a Final Judgment 
https://www.sec.gov/files/litigation/litreleases/2023/judg25813.pdf that permanently enjoins him from violating Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder; and orders him to pay a $50,000 penalty. As alleged in part in the SEC Release:

[C]atenacci, a Chicago, Illinois based medical doctor, entered into a consulting agreement with Five Prime to serve as a lead clinical investigator for the company's Bemarituzumab drug trial. Through this role, Catenacci allegedly learned material nonpublic information about the positive drug trial results for Bemarituzumab. According to the SEC, shortly after he allegedly learned of the positive results, Catenacci purchased 8,743 shares of Five Prime. After the company publicly announced the positive drug trial results, Five Prime's share price increased over 300%. The next day, Catenacci allegedly sold all of his shares, realizing illicit gains of $134,142.

CFTC

CFTC Charges Texas Man and His Company with Fraud and Misappropriation (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8768-23
In a Complaint filed in the United States District Court for the Northern District of Texas, the CFTC alleged that Walter Dunning Larrick, III, and Cambridge Financial Advisors, LLC, fraudulently induced at least 70 people to invest over $3.6 million in a purported commodity pool and then misappropriated most of the pool funds. As alleged in part in the CFTC Release:

[F]rom at least November 2020 and continuing through at least January 2023, the defendants solicited and pooled at least $3,644,817.52 from approximately 70 pool participants (pool participants) for the purported purpose of trading futures contracts and options on futures contracts. To induce the pool participants to send them money, the defendants made fraudulent and material misrepresentations and omissions including Cambridge had been in business for over 20 years and had a history of providing clients with profitable returns; Cambridge was a U.S.-based company and pool participants’ funds would be maintained by Cambridge in a bank account in the U.S.; pool participants’ funds would be used to trade futures and options, including natural gas, oil, and gold, which Cambridge would purchase in large “blocks” and at a discounted rate; Cambridge employed a hedging strategy that ensured the profitability of its trading regardless of whether the price of the underlying commodity rose or fell; Cambridge would receive a 15% commission on trading profits; and pool participants could withdraw their funds at any time.

Instead of trading the funds as promised, the defendants misappropriated the pool participants’ money. The defendants transferred the majority of the funds to offshore bank accounts in Costa Rica, and used most of the remaining funds to pay for various personal expenses for Larrick, or to make Ponzi-like payments to pool participants. To conceal their misappropriation, the defendants created and issued false account statements that misrepresented trading returns pool participants purportedly earned. When pool participants requested their funds, the defendants either ignored their requests or engaged in conduct designed to delay payouts for as long as possible.

FINRA